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A contractor is considering the following three alternatives: a. Purchase a new tractor for $15000....

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Accounting

A contractor is considering the following three alternatives:

a. Purchase a new tractor for $15000. The system is expected to last 6 yr with a salvage value of $1,000.

b. Lease a new tractor for $3,000 per year, payable in advance (at the begining if each year). The system should last 6 yr.

c. Purchase a used tractor for $8,200. It is expected to last 3 yr with no salvage value.

If interest rate of 12% is used, which alternative should be selected?

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